After Terraform
Labs Crypto Trial Verdict of
Liable SEC Gets $4B Settlement
Approved
by
Matthew Russell Lee, Patreon Substack
SDNY
COURTHOUSE,
June 13 – The SEC's trial
against Terraform Labs
began on March 25. Inner City
Press was there, thread. On
November 17, 2023 US District
Court for the Southern
District of New York Judge Jed
S. Rakoff held a hearing on
potential trial experts. Inner
City Press live tweeted that
too, thread.
More on Substack
here
Ten days later on
April 5, Judge Rakoff gave
legal instructions to the jury
for deliberation, including
that "I instruct you
as a matter of law that the
tokens known as UST, LUNA, and
wLUNA are securities." Full 24
page legal instructions to
jury on Patreon here.
And then the
verdict: Liable, liable,
liable - and reckless, not
intentional.
On April 19 the
SEC filed a motion for
injunction against violations,
and $4 billion disgorgement,
to fine Terraform Labs $420
million and Do Kwon $100
million. Motion on Patreon here.
On May 30, after
an unceremoniously canceled
May 29 proceeding, this:
"Minute Entry for proceedings
held before Judge Jed S.
Rakoff: Telephone Conference
held on 5/29/2024,without
transcription or recording.
Counsel for all parties was
present. The oral argument
previously set for 5/29/2024
has been cancelled because the
parties have informed the
Court that they reached a
settlement in principle. The
parties must file, by
6/12/2024, papers in support
of a proposed final judgment
consistent with the
settlement."
On June 12, Judge
Rakoff approved it: "FINAL
JUDGMENT AGAINST DEFENDANTS
TERRAFORM LABS PTE LTD. AND DO
HYEONG KWON: IT IS HEREBY
ORDERED, ADJUDGED, AND DECREED
that Defendants are
permanently restrained and
enjoined from violating,
directly or indirectly,
Section 10(b) of the Exchange
Act [15 U.S.C. § 78j(b)] and
Rule 10b-5 promulgated
thereunder [17 C.F.R. §
240.10b-5], by using any means
or instrumentality of
interstate commerce, or of the
mails, or of any facility of
any national securities
exchange, in connection with
the purchase or sale of any
security: As further set forth
in this Order. IT IS FURTHER
ORDERED, ADJUDGED, AND DECREED
that Terraform is liable for
disgorgement totaling
$3,586,875,883, which
represents net profits gained
as a result of the conduct
alleged in the Complaint,
together with prejudgment
interest thereon in the amount
of $466,952,423. Of these
amounts, Kwon is jointly and
severally liable with
Terraform in the amount of
$110,000,000 of disgorgement,
plus prejudgment interest
thereon in the amount of
$14,320,196. Pursuant to
Section 20(d) of the
Securities Act [15 U.S.C. §
77t(d)] and Section 21(d)(3)
of the Exchange Act [15 U.S.C.
§ 78u(d)(3)], the Court
further imposes a civil
penalty on Terraform of
$420,000,000. The
$4,473,828,306 in total
monetary remedies against
Terraform shall be payable as
provided for in the confirmed
Chapter 11 Plan in the
Bankruptcy Case, as set forth
in the following paragraph. As
further set forth in this
Order. IT IS FURTHER ORDERED,
ADJUDGED, AND DECREED that
Kwon is liable for
disgorgement totaling
$110,000,000, together with
prejudgment interest thereon
in the amount of $14,320,196.
Pursuant to Section 20(d) of
the Securities Act [15 U.S.C.
§ 77t(d)] and Section 21(d)(3)
of the Exchange Act [15 U.S.C.
§ 78u(d)(3)], the Court
further imposes a civil
penalty on Kwon of
$80,000,000. Kwon shall begin
to satisfy these obligations
by directly transferring to
the bankruptcy estate in the
Bankruptcy Case, assets and
funds as set forth in the next
paragraph herein. Payment of
the monetary remedies against
Kwon shall be deemed
satisfied, provided that all
transfers by Kwon to the SEC
and the Terraform bankruptcy
estate in the Bankruptcy Case
total no less than
$204,320,196, excluding the
value of any Terraform Crypto
Assets transferred to the
Terraform bankruptcy estate,
only if and until Kwon
completes: (1) transferring
into an escrow account agreed
by Kwon and the Commission
staff $4,700,000 within 30
days of Final Judgment as set
for the above; (2)
transferring into an escrow
account agreed by Kwon and the
Commission staff $2,300,000 of
assets belonging to Kwon in
accounts at Sygnum Bank of
Zurich, Switzerland,
associated with Portfolio
Number 84.002.088-00, within
30 days of Final Judgment; (3)
transferring to the Terraform
bankruptcy estate in the
Bankruptcy Case within 30 days
all crypto assets of the Luna
Foundation Guard, which shall
first be applied to satisfy
the disgorgement amount and
prejudgment interest with any
remaining assets applied to
the civil penalty amount; As
further set forth in this
Order. IT IS FURTHER ORDERED,
ADJUDGED, AND DECREED all
parties have knowingly and
voluntarily consented to waive
the right, if any, to appeal
from the entry of this Final
Judgment. IT IS FURTHER
ORDERED, ADJUDGED, AND DECREED
that this Court shall retain
jurisdiction of this matter
for the purposes of enforcing
the terms of this Final
Judgment. (Signed by Judge Jed
S. Rakoff on 6/12/2024)."
More on X for
Subscriber here
& Substack here
The case is
Securities and Exchange
Commission v. Terraform Labs
Pte Ltd. et al., 23-cv-1346
(Rakoff)
***
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